Why Cash Flow Kills Trade Businesses
Most trade businesses don’t fail because of a lack of work. They fail because money is going out faster than it’s coming in. You’re buying materials on credit, paying wages weekly, but waiting 30, 60, or even 90 days to get paid by clients.
In this guide, we lay out five concrete strategies to accelerate your cash collection cycle.
Strategy 1: Invoice Immediately
Do not wait until the weekend to process invoices. By sending the invoice the moment your tools are packed, you capitalize on the customer’s peak satisfaction and avoid forgetting billable parts or hours.
Strategy 2: Accept Card on the Spot
Accepting card payments or mobile wallet transfers via your job management app eliminates payment delay. Customers expect to pay for services immediately, similar to retail transactions.
Strategy 3: Require Upfront Deposits for Large Jobs
For any job with material costs exceeding $1,000 or duration longer than three days, mandate a deposit:
- Residential: 20% to 30% deposit prior to scheduling.
- Commercial: Stage claims or progress payments at predefined completion milestones.
This covers your cost of materials upfront and reduces your financial exposure.
Strategy 4: Setup Automated Dunning and Reminders
Save time spent manually emailing or calling overdue accounts. Configure automated notifications to send reminder texts and emails at set intervals:
- 3 Days Overdue: Polite reminder containing direct payment link.
- 7 Days Overdue: Standard reminder warning of potential service stoppage.
- 14 Days Overdue: Final notice before account suspension or external collections.
Strategy 5: Standardize Clear Payment Terms
Write payment terms explicitly on all quotes and invoices. Instead of using “Net 30” (which is often misunderstood), state “Payment due within 7 days of invoice date” or “Due on completion.”